Collection Strategies & Risk Assessment Flashcards

Which practice most improves right-party contact (RPC) rates?

Answer: Using skip tracing and data hygiene to verify phone numbers

Accurate, verified contact data increases the chance of reaching the actual debtor.

An 'early-out' program in collections typically refers to what?

Answer: Pre-charge-off outsourcing of early-stage delinquencies, often under the creditor's name

Early-out vendors work early-stage delinquent accounts before charge-off, often as an extension of the creditor.

A creditor calculates its allowance for doubtful accounts using percentages applied to each aging bucket. What method is this?

Answer: Aging of receivables method

The aging method applies increasing loss percentages to older receivables buckets.

Which payment term poses the LOWEST credit risk to a seller?

Answer: Cash in advance

Cash in advance eliminates nonpayment risk because the seller is paid before shipping.

Behavioral scoring differs from application scoring because it relies mainly on what?

Answer: The customer's actual payment and account history after onboarding

Behavioral scores use ongoing account performance to predict future risk.

When a debt of $600 or more is canceled, which IRS form may an applicable financial entity be required to issue?

Answer: Form 1099-C

Form 1099-C reports cancellation of debt of $600 or more by applicable entities.

Before deciding to litigate a delinquent commercial account, which factor is MOST important to evaluate?

Answer: The debtor's attachable assets and likelihood of collecting a judgment

A judgment has value only if the debtor has assets or income that can be reached.